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Endo CEO touts 'exciting' $2.2B bid for Auxilium, but his target may not agree

Endo's ($ENDP) got a deal for Auxilium Pharmaceuticals ($AUXL) in mind. CEO Rajiv De Silva thinks it could be a home run, and analysts seem to agree. Auxilium, however, needs some time to think it over, and it's swallowed a poison pill to make sure it gets just that.

Chesterbrook, PA-based Auxilium took up the defense plan Wednesday after receiving Endo's $2.2 billion cash-and-stock offer, which amounts to a 31% premium on its Tuesday closing price. The poison pill will provide its board with "sufficient time to make informed judgments," the company said

Endo, on the other hand, is "ready to engage immediately with Auxilium, complete our confirmatory diligence, negotiate a definitive agreement and complete this exciting transaction," De Silva said in a statement. And the way Sterne Agee analyst Shibani Malhotra sees it, it's no wonder: A deal could provide $0.39 (9%) EPS accretion in 2015 and $0.83 (17%) accretion in 2016. And it comes with the potential for tax synergies to increase those figures down the line, he wrote in a note to clients.

Thing is, Auxilium already has a deal of its own in the works for Canadian eye-drug maker QLT--and De Silva has suggested it'll be one or the other. "Our offer is for Auxilium only," he said on a Tuesday conference call, as quoted by Reuters. "We would leave it up to Auxilium's management and its board to come to its own conclusions on how they view our transaction versus the transaction with QLT."

But with portfolios Endo called "highly complementary," the Malvern, PA-based pharma likes its chances. Auxilium's 12 FDA-approved products--including Xiaflex, which treats curvature of the penis--would fit right in with its own men's health and pain offerings, it figures. And it could pile product and location synergies onto the $75 million in cost savings it anticipates squeezing out of a merged company's operating expenses.

As such, Canaccord Genuity analyst Corey Davis, for one, thinks Endo will ultimately prevail in making Auxilium its latest conquest in a string of recent deals. "We think the deal has an uber-high probability of being consummated," he wrote in a note to clients. "Although Endo was light on number-detail, it would obviously be accretive and is a great first step in the right direction of buying things to maximize [Endo's] terminal multiple."